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In May 2012, the City approved and announced a $200,000 loan to purchase the property at 2424 Dempster St. to bring Chicago’s Home of Chicken & Waffles to Evanston. Five months later, in December, the City provided another $5,800 to the restaurant for façade improvement. The restaurant opened to great fanfare in March 2013.
The restaurant hosted political election night rallies, offered live music, and hosted the Jackie Robinson Chicago Little League team that made a run in the Little League World Series. The restaurant teemed with local employees and large crowds. All appeared to be good – for a time.
By July 2015, the restaurant was closed, and the City, sitting in a second-loan position behind First Bank and Trust, looked at the possibility of collecting little or nothing on its $205,800 investment. The extent of loss came into focus on April 25.
According to documents included in the Council packet and information provided by City staff at the April 25 City Council meeting, the City expected to walk away with a check for $59,832.36 plus a $3,803.44 water-bill payment and $2,700 in transfer taxes – representing about 30% of the City’s investment.
The good news: The property is being sold to a new restaurant, reportedly Kabul House, now located on Oakton Street and Niles Center Road in Skokie. City Manager Wally Bobkiewicz said the new business has not asked for any City of Evanston assistance to date. A new restaurant at the same Dempster location would, in effect, realize the City’s original economic development goal for the area.
An apparently conflicted City Council wrestled on April 25 with how to attempt further collection efforts, with Alderman Brian Miller, 9th Ward, leading the charge for greater due diligence in seeking out a larger payoff from the owner of Chicken and Waffles.
At issue was the City’s mortgage on the property, which must be released at the sale of the property when a buyer acquires the title to it. As is typical in what are known as “short sales,” lenders are not completely repaid, because the proceeds from the sale are not sufficient to pay off all debts.
In this case, according to documents provided to Corporation Council Grant Farrar, the arrearage in property taxes prevents the City from collecting more than a fraction of what is owed, even though the sales price on the contract is about $500,000, after real estate agent commission. After First Bank and Trust, which stands in a position ahead of the City, collects more than $186,000 and the property tax debt of $194,562.30 is paid, the City will receive a portion of what remains.
“The seller is never going to pay the taxes, never wanted to pay the taxes, and this is the issue,” said Mr. Farrar. “Dealing with the seller’s attorney has been challenging, to say the least,” he added, saying he expected the attorney to be “not cooperative all the way up to closing, at closing, and post-closing.”
Mayor Elizabeth Tisdahl said, “Jay Lytle [former mayor and retired manager of First Bank & Trust] called me three or four weeks ago, concerned from the bank’s point of view that we not drag our feet, which is his quote. I would deny that we are dragging our feet. Every week of delay results in additional taxes and other carrying costs.”
“My focus is trying to get this building back on the tax rolls and doing business and producing something for us so we don’t have a complete loss,” said Alderman Delores Holmes, 5th Ward.
Alderman Ann Rainey, 8th Ward, agreed. “The problem here is that the [new] buyer [of the property] is the victim if we do nothing,” she said. The City should consider the loss taken on the Chicken and Waffles loan “our contribution to a new business coming in” to Evanston and generating “liquor tax, property taxes,” and other economic development.
“We are all angry and disappointed with where we are on this,” said Alderman Don Wilson, 4th Ward. He asked that Mr. Farrar attempt to release the mortgage without completely releasing the debt owed, keeping open the possibility of trying to collect the debt from the Chicken & Waffles owner, outside of the real estate closing.
Ald. Rainey said she thought any additional collection efforts would be a waste of time. The owner was a separate corporate entity formed to own and operate the restaurant, and that corporate entity is no longer in good standing.
Ultimately, Ald. Wilson proposed a modified resolution to “authorize and direct Corporation Counsel to attend the sale and closing to release the mortgage in exchange for a distribution of proceeds.” His resolution, he explained, offered the City’s attorney the chance to negotiate at the closing table and return with a check.
“I like the way you said it,” said Mayor Tisdahl. “Just don’t come home without a check. That’s perfect.”
The measure passed 8-1, with only Ald. Miller voting “no.”